Comments on: Why Zynga couldn’t go public soon enough – Customer Ecosystem Weakness

By: Amina

Amina — Fri, 25 May 2012 18:31:03 +0000

AJ,The issue for Zynga is that “virtually all” revenue comes from Facebook (from their S-1). To be a stasainuble, long term business, Zynga will need to have a diversified stream of revenues that are not tied to a single source. I think it would be very difficult, if not impossible, to find a publically traded company with a market cap over $20B that has 98%+ of their revenue coming through a single supplier. It is unheard of. So while this does not pose a threat to Facebook in the short term, it is vitally important to Zynga in the medium to long term. At the end of the day, content is King and we will see game providers like Zynga win. With Facebook’s move to their native app on iOS, they are delegating Apple to a hardware provider (e.g., Acer, NVIDIA) and providing the social plumbing. This will eventually work across the Android and iOS environments.Zynga will take that a step further and become fully platform agnostic. They will develop their games for Facebook, Android, and iOS using both native and universal apps. As other platforms develop, they will spread their games into those areas as well. Their players will associate not with the device they play on (iPad3 versus Xoom2), but what game they are playing.Apple, Motorola, Samsung will all provide the hardware. Facebook/OpenFeint/WhoEverIsNext will provide the social plumbing. Zynga will sit on top of it all.Love to hear your thoughts.

By: technologiez

technologiez — Mon, 26 Jul 2010 10:20:56 +0000

When are they going to put out more applications so people other than those with the iphone can use the features on farmville/facebook?

I wouldn’t mind paying a fee…it will weed out those not interested in it and never play their farm again after their first visit. I am sure that this has clogged up a lot of space on the servers.

By: Joel Andren

Joel Andren — Wed, 25 Nov 2009 05:09:28 +0000

Hi Ro,

Zynga reported that offers were 1/3 of monetization. That’s not insignificant, any way you slice it. Also, I’m not alone in being skeptical that the percentage coming from offers is higher. I’d love to see an S1 filing from Zynga (or RockYou) proving me wrong, but until then I’ll be skeptical.

As far as your second point, maybe I was a bit hyperbolic about no one playing Farmville in three months, but if I said 3 years would I be wrong? I think my key point here is that the relationship with these games does not engender loyalty to the gaming brand. Therefore Zynga and other social gaming companies will need hit after hit in order to prosper. It’s just not an ideal situation.

That’s the whole point of the model. Retention is often the hardest part for a startup, especially if they’re trailblazing in a new space. It takes serious investments in brand, support and product development. I think Zynga is definitely moving in this direction, but they aren’t there yet.

By: Ro

Ro — Wed, 25 Nov 2009 01:05:08 +0000

Your last two categories for Zynga having issues with Upsell and Retention are not right. Offers are a small percentage of monetization for Zynga and all social game providers. How do I know this? We build social games and use our own offers platform. As for Retention, how long has YoVille, Mafia Wars, Texas Hold-em been around? Over a year for all three, without any material drops in growth.

By: Joel Andren

Joel Andren — Sun, 22 Nov 2009 07:09:24 +0000

Thanks Scott. I guess you can say the model is a prototype at this point. I developed it a couple of years ago and applied it to the enterprise space and then revised it when I was doing some work in consumer electronics. With my current focus on internet/web startups, I’m going to be using this blog to further develop the model through posts like this one.

By: Scott Rafer

Scott Rafer — Sat, 21 Nov 2009 04:54:26 +0000

Have you posted on the ecosystem model itself in more detail? It’s a good one.

By: Finance Geek » Notes on business sustainability – Joel Andren on Zynga

Finance Geek » Notes on business sustainability – Joel Andren on Zynga — Fri, 20 Nov 2009 14:02:37 +0000

[...] Andren posted a couple of weeks ago on Why Zynga couldn’t go public soon enough – in which he notes that everything is great at Zynga right now (revenues on a tear, Farmville is [...]

By: Joel Andren

Joel Andren — Fri, 13 Nov 2009 17:20:53 +0000

Hi Rob,

I think Zynga is in a fundamentally different place than they were two weeks ago.

a) There's a potential class-action lawsuit coming out of this. b) Their primary revenue stream (which I think offers are) is in jeopardy.

On the positive note, EA validated the space by paying $300 million for Playfish. Should be noted however, the reason why EA may have favored Playfish.

I think the investments that make the most sense for Zynga are:

-Build their brand so that users are loyal to Zynga and not Farmville. This will aid in the introduction of new games and will make users less reticent to spend to play a game because they already have a relationship with the company. -Invest in their developers, the space is crowded and the way to succeed is to be the best.

Perhaps the most important thing Zynga can do is begin by planning on being in this for the long haul. The chance for the quick win is over.

By: Rob

Rob — Wed, 11 Nov 2009 20:39:37 +0000

Interesting analysis, I wonder what investments Zynga could make to overcome their current weaknesses.